Distributors Circling Oren Peli’s ‘Area 51’

As ‘Paranormal’ takes big bucks, distribution rights are up for the director’s next project

The economics of the new Hollywood are a moving target, it’s safe to say.

The fast-charging sleeper hit “Paranormal Activity” – production cost $15,000 – is heating up the bidding over distribution rights to the next project of the director of the faux documentary, “Area 51.”

Numerous studios are testing the waters for a distribution deal, among them Paramount, DreamWorks, Sony and Lionsgate, according to executives familiar with the talks.

A bidding war should be a no-brainer. That’s because “Paranormal Activity,” a horror film, has already taken in a total of $8.3 million domestically, most of it this weekend, when it snagged an astounding $7.1 million in fewer than 200 theaters.

The release up to now has been a stealth campaign midnight screenings in college towns, expanding to a few dozen cities, fuelled by an online “Demand It” fan campaign.

But here’s the rub: the production cost on the new film is $5 million – a multiple that’s near 1,000 times the original.

Two executives familiar with the negotiations said that the producers were looking for a premium of three times the production cost of the new movie, and that had sent some potential bidders scurrying.

But those bidders may well come back after the movie peaks. Paramount is expected to expand the release next weekend to more than 1,000 theaters.

“I’d be stunned if they didn’t go wide next week,” said Stuart Ford, who runs IM Global, which controls international rights to the film.

One executive involved in negotiations said that Paramount and DreamWorks had both passed. But another insider familiar with the talks remarked that bidders will probably come back – “when the movie is at $50 million. There’s no reason to sell the movie before then.”

As the distributor of “Paranormal Activity,” Paramount is best positioned to be able to take distribution rights. But DreamWorks is also are said to be moving fast to secure distribution rights. DreamWorks, and more specifically Steven Spielberg, were the original champions and acquirers of the movie, which was made in 2007.

“Area 51” is another documentary style thriller, this one about three teenagers whose curiosity leads them to the legendary and mysterious Area 51 Air Force base deep in the Nevada desert. Like “Paranormal,” the narrative style will be the video, found-footage style that also worked so well with the “Blair Witch Project.”

The film stars unknowns, and is being produced by Jason Blum under his Blumhouse Productions banner, with Room 101’s Steven Schneider and IM Global chief Stuart Ford serving as executive producers. The film was co-financed by Aramid Entertainment Fund and Incentive Filmed Entertainment, with IM Global handling worldwide sales and CAA co-repping the title in the U.S.